Gold Hits Record High Amid Fed Rate Cut Expectations and Tensions in the Middle East
- Gold price surges to new all-time high above $2,630
- US economic data shows mixed signals with manufacturing weakness but services sector resilience
- Fed officials cautious about aggressive rate cuts, highlighting labor market risks
- Rising tensions in the Middle East drive safe-haven appeal for Gold
Gold prices climbed to new heights on Monday, surpassing $2,630, driven by growing expectations that the US Federal Reserve (Fed) will lower interest rates in November. The XAU/USD pair traded at $2,627, marking a more than 0.20% increase.
US Economic Data and Fed Policy
Recent data from the United States revealed a mixed picture. S&P Global’s Flash PMIs indicated weakness in the manufacturing sector but resilience in the services industry. Despite the modest deceleration compared to August’s data, the services sector remained robust while manufacturers faced challenges.
While the Atlanta Fed’s GDP Now model projects a 2.9% growth rate for the US economy in Q3 2024, concerns about the labor market softening have been raised by Fed officials. The Fed remains cautious about aggressive rate cuts, emphasizing the need for flexibility in policy decisions to address growing risks in the labor market.
Global Developments and Safe-Haven Appeal
Escalating tensions between Israel and Hezbollah in the Middle East have heightened the safe-haven appeal of Gold. The conflict has sparked concerns about geopolitical instability, potentially driving further demand for the precious metal as investors seek refuge from market uncertainties.
Market Analysis and Fed Commentary
- US S&P Global Manufacturing PMI declined to 47.0 in September, below forecasts and indicating weakness in the sector
- S&P Global Services PMI expanded to 55.4, suggesting resilience in the services industry despite a slight slowdown
- Global Gold ETFs saw modest net inflows of 3 metric tons last week, reflecting ongoing investor interest in the precious metal
- Fed officials, including Minneapolis Fed President Neel Kashkari and Atlanta Fed President Raphael Bostic, stress the importance of data-driven decisions and caution against rapid rate cuts
- Chicago Fed President Austan Goolsbee anticipates the need for further rate cuts in the coming year
Technical Outlook for Gold
While Gold’s upward momentum continues, there are indications of a potential retracement in the near term. The Relative Strength Index (RSI) suggests that a pullback may be on the horizon as the market corrects from overbought levels.
If XAU/USD drops below $2,600, key support levels to watch include $2,546 and the 50-day Simple Moving Average (SMA) at $2,481. On the upside, clearing the all-time high of $2,634 could pave the way for further gains towards $2,650 and $2,700.
Gold FAQs
Gold has a rich history as a store of value and safe-haven asset. Central banks hold significant Gold reserves to bolster their currencies during turbulent times. The precious metal’s price is influenced by various factors, including geopolitical instability, economic conditions, and currency movements.